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CHRIS MATTHEWS, HOST, “HARDBALL”: Tonight, the two leaders: Bush and Blair—one at 35 percent in public opinion; the other worse, at 26 -- face the music. Can they sell the course in Iraq? Let‘s play HARDBALL.

Good evening. I‘m Chris Matthews. In just 30 minutes, the president‘s chief war ally, Tony Blair, joins him at the White House for a press conference on the state of Iraq. With daily death and factional fighting, will Iraq ever become its own peaceful state, and when will American troops come home for good?

Plus, a major development in the CIA leak case. New court filings suggest that prosecutors may call upon the vice president himself to testify. David Shuster will have the full report. But we begin with NBC News chief White House correspondent, David Gregory.

(BEGIN VIDEOTAPE)

MATTHEWS: This is the meeting tonight, a press meeting of the special relationship between the United States and Great Britain. Blair and Bush, will there be any big news tonight?

DAVID GREGORY, NBC NEWS CHIEF WHITE HOUSE CORRESPONDENT: I don‘t think so. I think this is primarily marketing.

Look, both these leaders are suffering politically because of their role in launching this role (sic). What they are up against is public opinion in both countries that we‘re losing the war in Iraq, that it‘s stagnant, that it‘s a mess, that it‘s kind of a lost cause.

There is a new unity government. Prime Minister Blair was just there to meet with Nouri al-Maliki, the new prime minister in Iraq. They think there is reason for new hope here, and they want to share that with the American people tonight in a rare 7:30 p.m. East Coast time press conference, to make the point that there is reason to sort of stay engaged for the public, reason to have new faith, reason to believe that what everybody cares about, which is when troops are coming home, is actually closer to happening.

MATTHEWS: Prime Minister Blair is at 26 percent, we are told in “The Daily Telegraph” today, in job approval. President Bush is somewhere in the mid-‘30s based upon all our polling here at home. Does that represent the differences in their prestige at home? Is Blair really that bad off right now?

is in more of a lame duck status than I think President Bush is, but President Bush is sort of fighting to remain relevant, and I think even top administration officials make the case that the president is in danger of being tuned out by the American people on Iraq, which is a really serious matter, given how much has to be done there and given the size and the scope of America‘s commitment there in terms of U.S. troops, 133,000 troops there.

So, that being the case, the president still faces the major challenge of getting people to listen to him and retaining the credibility to be heard on this topic, to say there is reason to be hopeful about the direction the government is moving now.

MATTHEWS: Once again, Vice President Cheney has figured in the public discussions in the CIA leak case. Is there a sense now that he will be—that he will be testifying for the prosecution, or for his former chief of staff?

GREGORY: Well, I think it‘s going to be—it‘s very clear that he is going to be drawn into this in some ways, perhaps on both sides, but there is no question from the prosecution point of view, for the special prosecutor making a case against his chief of staff, that he figured prominently in driving efforts to discredit Joseph Wilson as a critic of the war as somebody who was trying to undermine them and had to be responded to. And that out of the vice president‘s office, there was a concerted effort to discredit him, and the question is did that extend to outing his wife, former CIA Officer Valerie Plame? So I think he is central, really, in both cases, because I think from Scooter Libby‘s point of view is to say, look, I was merely instructed to do some of these things. There was an effort that I was part of to get all the facts out, and that really came from the top, the top of my office, and indeed from the very top of the White House, from the president himself.

MATTHEWS: Give me some West Wing geography. A lot of people look upon the vice president and the president as living in separate worlds. Scooter Libby being somewhere off somewhere with the vice president. Tell us in the White House configuration, on the second floor of the West Wing, where you work there, how close do they work together? Do they bump into each other all the day, Scooter Libby, Karl Rove, the vice president?

GREGORY: Well, there is no question that they used to when Scooter Libby was around. Not—primarily because Scooter Libby was such an important—had such an important seat at the table for all the key national security discussions. So it wasn‘t simply the centrality of Cheney‘s role here and his role as the primary foreign policy adviser to the president, but also what came with that, having such a strong chief of staff, who was liaising with all of these top West Wing advisers—Karl Rove chief among them.

And you get a sense of that, Chris, even beyond, you know, what I can tell you from covering the White House from some of these public documents, from the court documents, about the conversations that Scooter Libby was having.

MATTHEWS: Let me ask you about the immigration bill. It‘s passed the Senate tonight. Is that indicative of what‘s to come? Are they more optimistic at the White House that they will get a bill from both houses?

GREGORY: Well, I think that they view this as an incredibly positive step, as creating some momentum for a more comprehensive bill, but I haven‘t been able to pick up much momentum that they are getting at all with the real stalwarts against this bill. House conservatives, conservatives who are up for reelection this year, who don‘t want any part of this bill that creates a path for illegal immigrants for citizenship and a temporary guest worker program and all the rest.

I mean, this is really the test of the president‘s muscle now, for him to start getting in there, into this conference that‘s coming down the pike, and start changing some minds.

I know strategically around here, they want to get to a place where they could make enough concessions to bring conservatives on board and still maintain the guts of the bill that the president wants, which is a big, sweeping approach.

I think the strongest argument that they will be able to make is, look, you cannot have such an exclusive approach on just enforcement, on just security. We are in charge. We run the government. We have to have a sweeping enough proposal that actually becomes law that the public thinks that we are doing something, you know, big and sweeping on this topic, or else we will be penalized for it.

MATTHEWS: Great to have you, David Gregory, chief White House correspondent for NBC News.

GREGORY: Thanks, Chris.

(END VIDEOTAPE)

MATTHEWS: Newly filed documents in the CIA leak case revealed that Vice President Cheney himself may be a prosecution witness against Cheney‘s own former chief of staff, Scooter Libby. The prosecution documents also contain previously secret grand jury testimony that places Cheney at the heart of the effort to undercut an administration critic. HARDBALL correspondent David Shuster reports.

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over): The latest prosecution filings reveal Vice President Cheney had a greater role than previously known in the actions that led to the outing of CIA operative Valerie Wilson. It was Wilson‘s husband, Ambassador Joe Wilson, who wrote this op-ed criticizing the Bush administration‘s main case for war with Iraq.

Prosecutor Patrick Fitzgerald states, quote, “As the defendant, Scooter Libby, admitted in his grand jury testimony, he communicated extensively with the vice president regarding the Wilson op-ed during the relevant period, and received direction from the vice president regarding his response.”

Fitzgerald also said this: “The state of mind of the vice president as communicated to defendant is directly relevant to the issue of whether the defendant knowingly made false statements to federal agents and the grand jury.”

JONATHAN TURLEY, GEORGE WASHINGTON UNIV. LAW CENTER: Everything ends up at Dick Cheney‘s desk. His right hand man is indicted, he‘s intimately involved in the Niger allegation with weapons of mass destruction, he‘s the one that seems to have instructed Libby. The biggest question is not whether he‘ll be called as a witness, but why he wasn‘t a co-conspirator.

SHUSTER: According to Libby‘s grand jury testimony about Cheney, the vice president saw Joe Wilson‘s op-ed as an attack on his credibility. Prosecutor questioned to Libby, “Was it a topic that was discussed on a daily basis?” Libby: “Yes, sir.”

“And it was discussed on multiple occasions each day, in fact?” “Yes, sir.” And during that time, did the vice president indicate that he was upset that this article was out there which falsely in his view attacked his own credibility?” “Yes, sir.”

“And do you recall what it is that the vice president said?” “I recall that he was very keen to get the truth out. He wanted to get all the facts out about what he had or hadn‘t done, what the facts were or were not. He was very keen about that and said it repeatedly.”

One alleged fact the vice president seemed to zero in on was the idea that nepotism contributed to Joe Wilson‘s findings. On a copy of the Wilson op-ed, Cheney wrote, quote, “did his wife send him on a junket?”

Prosecutors are not asserting that Cheney instructed Libby to leak to reporters and then lie about it to the grand jury. But Patrick Fitzgerald argues that Cheney‘s interactions with Libby were a key part of what motivated Libby to obstruct the investigation.

Fitzgerald indicated that he may call Cheney as a prosecution witness. Cheney‘s testimony would be used to prove that Libby learned Valerie Wilson‘s identity from the vice president and other government officials, not from reporters.

SOL WISENBERG, FMR. DEPUTY INDEPENDENT COUNSEL: So if you‘re the prosecutor, you want to be looking at everything, every little thing that could get you to convince a jury this is not the kind of thing that a person would forget.

SHUSTER: Last week, Scooter Libby‘s defense team downplayed the significance of Vice President Cheney‘s notes on the Wilson column by declaring Libby never saw the notes until the FBI showed him a copy. But in the actual grand jury testimony released by Fitzgerald, Libby said of the column, quote, “It‘s possible if it was sitting on his desk that, you know, my eye went across it.”

Documents released earlier in the case indicate Vice President Cheney and Libby talked about the Wilsons on the very day Libby allegedly leaked her identity to two reporters. Is Patrick Fitzgerald trying to build a case against Vice President Cheney?

TURLEY: Well, sometimes prosecutors will not indict someone in the hopes that a former colleague will flip, like Scooter Libby. But I got to tell you, they can wait until the cows come home, but Scooter Libby is not going to flip on Dick Cheney.

SHUSTER: Meanwhile, in the investigation of Karl Rove, sources close to the presidential adviser are now confirming a story first reported in the “National Journal” that Rove, who was a source for columnist Bob Novak, later had a separate conversation with Novak after the investigation began.

Former federal prosecutors are convinced Fitzgerald has explored whether Rove and Novak coordinated their testimony, but today a spokesman for Karl Rove said, quote, “Karl Rove has never urged anyone directly or indirectly to withhold information from the special counsel or to testify falsely. Circulating such speculation now is nothing short of irresponsible.”

(on camera): But the contention is not that Karl Rove urged Bob Novak to withhold information. Rather, it‘s that Rove was assured early in the case that Novak, to use a phrase from the grand jury testimony, was not going to burn him. Today Robert Novak was unavailable for comment.

As for the overall investigation, including the Scooter Libby case, there was also no comment today from Vice President Cheney. I‘m David Shuster for HARDBALL in Washington.

(END VIDEOTAPE)

MATTHEWS: Thank you, David. Coming up, President Bush and Prime Minister Blair are about 20 minutes away right now from their joint press conference at the White House. What are we going to learn tonight? What will be the headlines? Stay tuned, you‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. We‘re now about 15 minutes away from President Bush‘s joint press conference at the White House with British Prime Minister Tony Blair. And we‘re joined right now by MSNBC chief Washington correspondent Norah O‘Donnell, “Newsweek‘s” Evan Thomas, but we begin with MSNBC political analyst Pat Buchanan.

Pat, take a minute and explain the president‘s predicament. He is at 36 percent roughly in the polls. His companion tonight, Tony Blair. is at 26 percent in the polls according to today‘s “Daily Telegraph.” Will tonight‘s press conference help them get out of a ditch?

PAT BUCHANAN, MSNBC POLITICAL ANALYST: I don‘t think it‘s going to help them a great deal, Chris. What you‘ve got is the last two survivors on the island after Berlusconi‘s gone. And I think Blair is coming here and he‘s going to try to get some good news on Iraq although the new government there, it‘s two cheers for that government, certainly not three cheers.

The situation in Iraq you get repeated reports of assassinations, of atrocities, of death squads, it goes on and on and on. There is no light at the end of the tunnel there. I think the president is going to try to insert himself. I thought he might do it later tonight into the, quote, “victory he has got in the Senate,” to try to say in effect “I‘m not only relevant, we‘ve led this battle, we have won the Senate. I‘m going to get the greatest immigration bill in a long, long time through the Congress.”

So I think the president is a necessary thing to do. It‘s a good thing to do. But my predictions would not be that he is going to get a great success out of it.

Let me here another view here. Join me here in this discussion. Do you think the president can begin to as we say in baseball terms, hit some singles, get a bill through the Senate? Maybe not a big home run, but get something through, begin to show that he is govern tonight?

O‘DONNELL: This White House is always optimistic that they can turn around this president‘s troubled presidency. At 31 percent in the polls, they have to do something. But I‘ve spoken with White House officials this week who acknowledge that the country is in a sour mood, that the country is weary, as one official put it to me.

And that even though they feel like they‘re doing great on the economy, that maybe they got this victory in the Senate on the immigration bill. Iraq has created this malaise. It‘s this ball and chain for the president.

And until that changes, they can‘t move forward on anything else. They recognize that now. And I also think in the White House they realize that it‘s not just a P.R. problem. They used to think, well we are not getting the good message out or the media is not taking the good message or whatever it is.

I think they recognize it‘s because there‘s problems on the ground. But there has been a victory in the last week for them and that is this formation slowly of this unity government. And the Iraqi prime minister making these timetable comments about when his own security forces can take over, most of the provinces in Iraq.

That gives Bush and Blair an out if they want it. The White House said today they‘re not going to talk specifically about when there‘s going to be troop withdrawals, but Bush could say something like what Blair just said in Baghdad. He said “We‘re going to get our troops out as fast as we can.” If Bush said something like that, that would be a headline that could help them. I think they want to give a sense that there is victory, that there is a light at the end of the tunnel, as Pat mentioned, where many people don‘t see one.

MATTHEWS: I guess the question is, are these statements of institutional development in Iraq able to overcome the daily information we are getting on the ground over there of American casualties?

THOMAS: I don‘t think so. Because there have been some turning points before elections, people holding up purple fingers and all that and it never really made much difference, you know, the killing just goes on.

I also think that both Bush and Blair, when they are together feel a little bit virtuous. You know, they hung in there, they‘ve hung in there. Their legacy is going to be this war and I think that not martyrish maybe, but virtuous. That even though their poll numbers are bad, even though it‘s not going well, even though this press conference is not going to help them—when they are alone and private, I think they both feel we‘re doing the right thing here, we‘re doing the best we can and that‘s the reward.

O‘DONNELL: But I think ultimately they are both politicians and as the economist said, it‘s the axis of feeble if they will. And they‘re both politicians, and they both have a legacy. They‘re almost out of office and I do think that they want to see this come to a successful conclusion.

MATTHEWS: Pat, are you impressed by their methodism, by the fact that the president and the prime minister both share this kind of do gooder instinct from their religious philosophies and that is somehow going to carry them and deliver them to a better world?

BUCHANAN: I think, CrMD+IN_rMDNM_hris, there is a great deal to that. I think especially with regard to the president and also with Blair. They believe they have done the right thing. They believe it deeply. They believe that in the end there‘s a real possibility, a la Harry Truman. That history will look back and say, “Wait a minute. Despite all the problems, it all turned out better in the end.” They believe in their cause. I think that‘s what keeps the president of the United States going.

Secondly, as you know, I‘m opposed to the immigration bill. I‘m not so sure the president‘s going to lose this. If he gets that into conference and he can get something out of conference, get it over onto the House floor, what happens then is I think the Democrats will deliver the victory. The Republicans might be split down the middle. But, you know, I hope, quite frankly—personally, I hope the bill goes down but I‘m not as confident it‘s going to go down.

MATTHEWS: Well, 70 percent of the Republicans in the United States Senate tonight against the bill. The house is seen to be more conservative. Why do you think the president would be able to get a majority of his own caucus over in the House?

BUCHANAN: Well, I think what the president‘s—if the president can get half of the caucus over there, I think he can win it. There is an awful lot of—there‘s a lot of Republicans that will go with him. There will be a lot of work done on him.

They will work on Hastert, also, to say, look, the country wants the bill. The majority of the House wants the bill. You can‘t hold it up simply because you don‘t have quite a numerical majority in the House. Hastert is the key here, Chris, and the folks negotiating the bill in the conference.

If they come out with a much more conservative bill in conference, you know, you could get half of the Republicans in the House. Some of them are peeling off. Mike Pence looked like he was peeling off yesterday. I know I can speak for the folks who are against this bill. They are very concerned the president could win it.

MATTHEWS: OK. We will be right back with more with Norah O‘Donnell, Evan Thomas, and Pat Buchanan as we continue to get ready for the prime-time joint press conference with President Bush and British Prime Minister Tony Blair.

You are watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We have got that big night feel here at MSNBC. We are awaiting a joint news conference at the White House with president Bush and British Prime Minister Tony Blair coming at the bottom of the hour, 7:30 tonight, an odd time to start. We are back with MSNBC‘s Norah O‘Donnell, “Newsweek‘s” Evan Thomas and Pat Buchanan.

Patrick Buchanan, why do we Americans like British leaders more than the British tend to like them? We seem to always fall for these guys.

chestnuts out of the fire. It goes back to World War II. There was a real

the idea that the Brits—you know, the Brits stuck in there as long as they did against the Nazis and the great relationship the United States had with Churchill.

And I think most Americans feel they are now—they are really the cousins and we have more in common with them and traditions and language and history and we walk through the ages together, although if you read the 19th century they weren‘t all that friendly to us.

MATTHEWS: All right. Well, Evan, it seems like we do enjoy that cousinhood more than we do with Mexico, for example. That‘s quite an excuse these days. If we were cousins with Mexico we wouldn‘t be fighting over the border so much. Clearly, Americans still see England as Mother England. Is that true? Is that why we like Church and we liked Sunny Jim Callaghan, we like the Anthony Eden, we loved MacMillan.

THOMAS: You know, I don‘t think it‘s ethnic anymore. I think that‘s about a century old. I think they remember World War II.

MATTHEWS: Even with you Evan?

THOMAS: Maybe with me. But most people in the real world don‘t remember the history. They remember World War II movies that we were together with the Brits in the only good war that we have ever had.

MATTHEWS: And so it‘s still “Bridge on the River Kwai,” we and the Brits in those short pants and fighting in Singapore.

O‘DONNELL: There is this fallacy, I think, that many Americans probably think that we are in it 50/50 with the British in Iraq. And guess what? We‘re not. It‘s 133,000 U.S. troops. Do you know how many British troops are in Iraq?

MATTHEWS: Nine hundred?

O‘DONNELL: Eight thousand. So it‘s largely an American war. And while this looks like two men who share the burden of Iraq here in the East Room of the White House today where they are both defend this very controversial policy.

MATTHEWS: We like that seat for some reason. Why do we like that, that it is Anglo-American and it is sort of even Steven.?

THOMAS: Because we don‘t have any friends in the world right now.

This is it. They are the only ones. So let‘s hang on to them.

MATTHEWS: Pat, what do you think of this horse and rabbit stew that‘s being sold to us as Norah pointed out? It is us the horse and the Brits are the rabbit in terms of numbers in this stew.

BUCHANAN: Well, you know, I don‘t go along entirely for this reason. The Brit contribution clearly is smaller but Tony Blair was a real stand-up guy for the president. I mean, he is not a British conservative but as a Labor—new Labor leader he certainly stood beside the president of the United States. He stood beside the United States in 9/11.

I think Americans look to the Brits constantly. If we do have one friend in the world it‘s going to be the Brits who are beside us. And I think there is a tremendously broad appreciation, frankly, not only of Britain but of Tony Blair in this country. Us a mentioned earlier, Chris, his ratings in this country are not 26 percent. I bet you he is well over 50 percent in the United States. He is well-liked guy.

MATTHEWS: He is. In fact, even in films and I‘m a film buff—I think Norah sees movies as well. When you see him played by Hugh Grant, you figure we must like this guy. I think he is a charmer and I think we do look at him—there is something about America we still suffer the inferiority complex of a country that needs an older country to tell us we are right. We seem to like that, Evan.

THOMAS: Well, he is more articulate than the president for one thing. But he paid a political price. This is the hardest thing in politics. He brought his own polls down. He paid a real price to stand by us and we shouldn‘t forget that.

MATTHEWS: And those polls have been down. I was talking to the British ambassador last night getting the latest fill on what‘s going on, and he points out that the polls went down for him immediately over there when he joined us in the coalition of the willing, and he‘s taken this as a stalwart, all this time. He has not buckled.

O‘DONNELL: He has not, and of course, under, you know, the British press calling him the poodle—Bush‘s poodle over there which is, of course, extremely derogatory. And the American press would never do that.

MATTHEWS: I think they prefer bulldog. A kind last word, Pat.

BUCHANAN: You know, Chris.

MATTHEWS: Yes.

BUCHANAN: Chris, you know, Dean Acheson said “the British have lost an empire but they‘ve not yet found a role.” Tony Blair said I‘m with the Yanks.

MATTHEWS: OK, he sure—there they come, same height, both chipper. And the president of the United States and the Prime Minister of Great Britain are coming to the mics. Here they are.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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